The euro fell against the dollar on Thursday as investors booked profits on its recent rise ahead of US jobs data while the dollar fell to a 15-year low against the yen. Investors are bracing for the Federal Reserve to start pumping more money into the US economy next month to boost growth. Those expectations have driven the euro up 6 percent since August and also pushed the greenback to a record low against the Swiss franc.
But the euro's rise above $1.40 in early New York trade, a level not breached since January, prompted a round of profit-taking, particularly ahead of US jobs data due on Friday. "The euro has run up so quickly, and once we broke the $1.40 handle, we ran out of buyers," said Boris Schlossberg, head of research at GFT Forex. "People are getting cautious and taking profits."
Technical indicators, however, showed the euro remained firmly in an uptrend, and BNP Paribas technical strategist Andrew Chaveriat said it would take a solid break below $1.38 and probably a subsequent test of $1.3635 to signal a significant correction. The eurolast traded at $1.3910, down 0.2 percent. Earlier it hit $1.4030 on EBS.
The dollar fell 0.6 percent to 82.36 yen, near a 15-year low of 82.11 yen. Traders said there were options barriers around 82 yen. The dollar's decline below 82.87 yen, the level where Tokyo intervened for the first time in six years on September 15, increased market anxiety.
Currency intervention and talk of monetary loosening by central banks has ignited the issue of global economic imbalances ahead of an International Monetary Fund meeting this weekend, where the threat of a "currency war" is likely to dominate discussion. But Maurice Pomery, managing director of Strategic Alpha in London, said the meeting was unlikely to produce agreement on trade imbalances as countries would keep acting independently to boost growth. Speculators ramped up bets in favour of the euro in the latest week, Commodity Futures Trading Commission data showed, and opened the biggest short dollar position since 2008.
But Chaveriat said any euro pullback to the $1.35-$1.36 area over the coming weeks would probably be just a brief interlude between euro rallies. The Australian dollar, another favoured currency in recent months, surged to a 27-year high above $0.99 after surprisingly strong Australian jobs data revived talk of an interest rate hike. It was last at $0.9817, up 0.5 percent.
Sterling rose to $1.6019 after the Bank of England kept interest rates on hold, though profit-taking pushed it back to $1.5861 by afternoon. Traders said it would have to fall solidly through $1.58 to enter a downtrend. The dollar fell to an 8 1/2-month low against a basket of currencies and an all-time low against the Swiss franc of $0.9555 on trading platform EBS.